The Heritage Foundation

News Releases on Taxes

February 8, 1999

February 8, 1999 | News Releases on Taxes

Government Exacts a Price--For Love

WASHINGTON, FEB. 8, 1999-Sure, the candy and flowers on Valentine's Day will be expensive. And dinner at the fancy restaurant will set you back a pretty penny. But you can't put a price tag on love, right?

Wrong. The federal government can-and does. Each year around tax time, the "marriage penalty" serves as a painful reminder for millions of couples that being married costs more than being single. Indeed, if these couples just lived together, they would save an average of $1,400 a year on their tax bills. That's why any tax reform passed by Congress this session should fix the marriage penalty, argues a new paper by The Heritage Foundation.

"Discriminatory tax rates are the root of the problem," writes Daniel J. Mitchell, Heritage's McKenna senior fellow in political economy. For example, higher tax rates kick in at lower income levels for married couples than for co-habitating singles. In 1998, the 28 percent bracket takes effect at $25,350 for single taxpayers. To be marriage-neutral, that rate should take effect at double the income for married taxpayers, or $50,700. But it begins to bite at $42,350.

But higher tax rates aren't the only problem. Two co-habitating taxpayers can also claim larger standard deductions than married couples. Even the earned income tax credit has created "substantial marriage penalties" for lower-income workers, Mitchell notes.

Only a flat tax completely eliminates the marriage penalty, Mitchell writes, because-as even the Congressional Budget Office admits-a tax code with progressive rates cannot achieve "marriage neutrality and equal treatment."

Short of instituting a flat tax, the best way to reform the tax code's "bias against marriage" is by increasing the standard deduction for married couples and raising the income level at which higher tax rates take effect, Mitchell says.

Another politically viable solution: letting couples choose their tax filing status. Nine states and the District of Columbia permit this option, which would provide an annual tax cut of about $30 billion.

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